Medical Coverage that Risks You $60,000?!!!

How would you feel if your insurance agent told you he has a medical insurance plan for you that is an 80 / 20 plan (meaning, you just pay 20% of the medical costs) and has a monthly premium of only $121.80? In today’s market, you would consider that a good deal, right? And you might feel that having to pay only 20% of your future medical costs is a good risk for that premium.

But suppose you buy that plan and then discover that, in a worst case scenario, your risk could be as much as $60,000 in a calendar year! How would you then feel about that plan?!

That “plan” describes Original Medicare. (For more specifics on Original Medicare, see my blog post, How Does Medicare Work?) Because of that enormous risk, most people decide to “cover” Medicare’s coverage “gaps”; that is, they significantly lessen their risk by buying another plan to work with, or in place of, Original Medicare.

Coverage through a Job

Some people are able to keep their medical insurance through work when they turn 65. If so, this may be a viable alternative to Medicare. However, if you are under 65 and are currently covered through your work, there are a few things to keep in mind about this option.

First, it may not actually be an option for you when you turn 65. More and more employers are terminating medical coverage for employees at age 65 and beyond. The obvious reason for this is to save money for the company. With a record number of people turning 65 this year, many employers believe they can no longer afford covering people from 65 till death.

Second, even if your employer does offer coverage for you at age 65 and beyond, you could incur significant out-of-pocket costs (such as a high deductible and coinsurance) for events such as MRIs, CT scans, and hospitalization—costs that could be provide you with a much greater cost risk than, say, a Medicare supplement may offer you. In addition, the monthly premium you pay for this plan may be greater than either a supplement or an Advantage Plan premium.

Coverage at age 65, for some selected employee insurance, continues unchanged. This means that the employee on this kind of plan does not need to purchase Medicare Part B insurance, because this kind of coverage does not work with Medicare. That would provide you with a monthly premium savings of $121.80.

However, more and more employers are changing the coverage at age 65 to work with Medicare (again, for cost savings to the employer). So, if your coverage works with Medicare, you will need to purchase Part B (as you will need both Parts A and B in that case). If so, either a Medicare supplement or a Medicare Advantage Plan may be a better option for you.

Medicare Supplement

Another alternative to consider for covering the Medicare coverage gaps is a Medicare supplement, also known as a Medigap policy. Supplements, which work with Medicare, have been designed by Medicare, but have been handed over to private insurance companies to administrate and to sell. (To get a supplement, one must have Medicare Parts A and B. A future blog post will provide more specifics on Medicare supplements.)

An advantage of having a Medicare supplement (verses a Medicare Advantage Plan) is that there is no network. (Although there are some “select” supplement plans, where one must use hospitals within the network, this article is referring to a true supplement with no network. By the way, this writer has encountered people who have unwittingly purchased a select supplement because the premium was lower than a true supplement; it is important to understand the difference and why it makes a difference to purchase a true supplement.) When you have a supplement, you can see any doctor throughout the U.S. who works with Medicare, providing you with greater freedom of choice—particularly among specialists—than is generally afforded by employer insurance or an Advantage Plan.

(Though there is a fear among some that it will be difficult to find a doctor who will accept their Medicare coverage, only 2 percent of seniors on Medicare nationwide have reported trouble finding a doctor when needing one. Furthermore, according to a national survey of physicians, 91% of doctors accept new Medicare patients, the same rate accepting new patients on non-Medicare private insurance. In fact, a 2013 Forbes article declares that the number of doctors accepting Medicare is on the rise, a statistic also cited by the New York Times.)

Another advantage of the most popular supplements, the G Plan and the F Plan, is the low out-of-pocket potential faced by supplement holders. On medical events covered by Medicare (see the blog post, How Does Medicare Work?), your annual maximum out-of-pocket cost should only be $166 with a G Plan and $0 with an F Plan synthroid tablets buy online. Not too bad.

A downside with a Medicare supplement is that prescription medications are not covered. Thus, one would need to purchase a prescription drug plan separately. (Note: It is important that your agent “shop” your medications among all Medicare Part D [prescription drug] plans in your service area to make sure you do not overspend on your plan or on your medications.)

Overall, a Medicare supplement is popular with seniors who are looking for great medical coverage with low out-of-pocket costs and who want to preserve their freedom of choice when needing a doctor (particularly a specialist).

Medicare Advantage Plan

A third option for dealing with the Medicare coverage gaps is an Advantage Plan. Advantage Plans, too, are administrated by private insurance companies, but they are highly regulated by Medicare (more so than are supplements). To acquire an Advantage Plan, one must have Medicare Parts A and B, be in the service area for the plan being purchased, and not have End-Stage Renal Disease.

In general, advantages of an Advantage Plan include a low monthly premium. Depending on the plan and service area, the premium on an Advantage Plan may be as low as $20. (There are still some $0 premium monthly plans available, but remember the old adage: “You get what you pay for.”)

Another advantage with many Advantage Plans is prescription drug coverage. Not all Advantage Plans come with prescription coverage, but most do. However, it is important for your agent to look up each of your medications to see how the Advantage Plan covers them—BEFORE you enroll on a plan; for some of your medications may not be covered by the plan, or you may consider the plan’s deductibles and copays to be too high for your medications.

Finally, an Advantage Plan can cover benefits not covered by Original Medicare or a supplement, such as dental, vision, hearing, etc. Some plans may even provide free over-the-counter items.

So, what are the downsides of an Advantage Plan? First, you will find that Advantage Plans have a network. PPO plans generally have a larger network, and you can use out-of-network providers by paying a greater cost; but you will need to stay within the network for all providers with HMO plans, or else pay the entire cost of the out-of-network provider. (There are also other kinds of Advantage Plans that will be covered in a future blog post.)

Another potential downside to the Advantage Plan is that each time you use it you will need to pay a copay. Some copays are not bad, such as a $5 copay for primary care physician visits on some plans; however, you may have to pay up to $400 per day for a hospital stay on some plans. While the Advantage Plan lowers your max risk (meaning, it puts a ceiling on your annual out-of-pocket costs) from the worst-case-scenario of Original Medicare at $60,000, still, a $6700 annual cap (as some plans have) does not compare with the $166 or $0 of a G Plan or F Plan supplement.

What Are Your Options?

All of this means you will have options for your medical coverage at age 65 and beyond. If you have an employer plan which does not work with Medicare, and both your premium and your potential out-of-pocket costs are low enough, you may want to stay with it. If your employer plan will work with Medicare, keep in mind you will have to purchase Medicare Part B for $121.80 monthly premium; and, as a result, you may want to compare the coverage being offered to you with a supplement and / or an Advantage Plan. If you will not be offered employer coverage, your basic choices are: Original Medicare only (with a significant out-of-pocket risk), an Advantage Plan, or a Medicare supplement.

While it’s nice to have options, it is wise to do comparisons on your situation. To make sure you make a wise choice, sit down with an experienced, independent agent (one who represents many insurance companies and plans) who will put you first. For it is only an advantage to have choices if you can make the wisest choice among those options. Happy shopping!

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